The country's maiden commodity exchange (CX) will function as a new segment of the port city bourse, not a subsidiary as was initially planned, since the new arrangement will help quicken the introduction of the market.
It will be just another platform of the Chittagong Stock Exchange (CSE), similar to the SME board.
Had the CSE stuck to the plan, the bourse would have had to undergo a process stipulated by the Registrar of Joint Stock Companies and Firms. The CX as a separate entity should have an independent board and paid-up capital for trading in standardised commodity contracts and related investment products.
Now, the CSE's existing board and paid-up capital will serve the purpose.
Mohammad Rezaul Karim, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said the existing rules had a provision allowing CX as a separate entity or as a segment of any stock exchange.
The CSE has been offered with a waiver in line with the rules so that it runs the CX as an extended part.
"But clearing and [trade] settlement will be separate. Even chief operating officer of the CX must be separate," Mr. Karim said.
A CX of this nature is not something unique, said Md Faisal Huda, a deputy manager and CSE product development committee member secretary, referring to the example of the commodity exchange run by the National Stock Exchange of India (NSE).
Any entity willing to be part of the CX as a commodity trader will have to acquire a TREC (trading right entitlement certificate) from the exchange.
The paid-up capital of new TREC holders should be at least Tk 100 million, enabling them to participate in the operations of the equity market as well.
The existing TREC holders of the CSE will also be able to join the CX if they meet the capital requirement.
Hence, the number of the CSE's TREC holders will rise following the introduction of the CX, with an enhanced opportunity to diversify investments.
The CSE had made a move to launch CX with a paid-up capital of Tk 4 billion and a board having a majority of independent directors.
Veering off the course, the BSEC on March 20 issued a conditional licence to the port city bourse for launching of a CX in a shorter period of time.
Licence given conditionally
The condition is relevant to ABG Ltd, an entity of Bashundhara Group.
ABG Ltd became a strategic partner of the port city bourse, purchasing its 25 per cent shares.
Stock and Security Linkway, a CSE TREC holder and a concern of ABG Ltd., has a stake of around 0.51 per cent in the CSE.
As a result, ABG's stake in the CSE has exceeded 25 per cent. But the demutualisation scheme does not allow any strategic partner to hold more than 25 per cent stake in the exchange.
Hence, the BSEC said ABG would have to transfer the additional shares to a separate entity having no affiliation with it -- within three months after the issuance of the CX licence.
No possibility of 'conflict of interest'
In May 2022, Bashundhara Group applied to the securities regulator for a licence to operate a private commodity exchange. The plea was rejected.
In November of the same year, ABG Ltd became a strategic partner of the CSE.
The objective of introducing the long-awaited CX is to ensure fair pricing of commodities.
Asked whether the purpose of the CX would be affected for the inclusion of a business group in the CSE, the bourse's Managing Director Shaifur Rahman Mazumdar said, "As per the existing legal framework, there is no scope of deviation from the objective of the CX."
The existing board will run the CX and the strategic partner has only one membership in the board.
"Instead, the product chain of the strategic partner will facilitate the establishment of the CX."
The CX will be strengthened through addition of more products in the commodity basket. With time, all business groups will participate in the trading on the CX.
"The CX will provide services to all groups, not any single group," added the CSE official.
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